The Product Life Cycle (PLC) is referred to as the “period from the product’s first launch into the market until its final withdrawal” (Komninos, 2002:3). The PLC diagram, see Appendix 1, shows the sales and profit lines when a product is first introduced to a market and when it is in decline. Evidently when a product is being developed a firm is not achieving sales but at the same time is spending capital in order to develop and manufacture the product, which results in a firm making a loss. However once the product is distributed and demand is high sales will increase along with profit with the new product gradually maturing. Demand nevertheless in theory declines as the product sales decrease which is where a firm needs to decide whether to develop further or introduce a new product. The decline phase is argued by Komninos (2002) as a complex and difficult time for businesses because there are many decisions that need to be made as whether to keep the product but whether maintaining in terms of spare part availability or services will gain the firm any profit or if introducing a new product will meet the demands of a firms customers. In these circumstances Komninos (2002) reveals that companies retain a high price policy for the declining product in order to increase its profit margin and discourage any remaining loyal customers. This can be argued to be one way of dealing with a declining product however another strategy would be market research and finding out if the declining product can be developed or whether a new product is worth introducing.
The theory behind the PLC should enable businesses to quantitatively observe when a product needs to be removed and the need to introduce a new product in order for it to achieve maturity and retain a business’s sales and profit, however there are arguments that do not favour the way in which the PLC portrays a products. For example Komninos (2002) argues that a products life cycle does not depend entirely on...